Last week it was reported that a predominant blue chip gallery is facing criminal prosecution for allegedly breaking sanctions requirements in 2022. They 'strongly contest' the charge and will be fighting it beginning at a pre-trial hearing next month.

This is one of the most significant enforcement actions yet, and we have been hearing from our community as they try to understand what this could mean for the wider market.

Here are our three key takeaways:

1. Sanctions rules are intentionally broad with no room for error.

This case isn't as simple as selling to a sanctioned individual - the collector involved was not designated on the sanctions list, but instead is considered connected to Russia. The alleged offence also occurred over three years ago, highlighting that it's not just recent infractions that the government is interested in.

The takeaway? Take sanctions very seriously. Make sure your compliance system considers the indirect ways that your buyer could be connected to sanction regimes. Document your process and decision making at the time, so you can refer back to it if an issue is raised, even years down the road.


2. Enforcement continues to expand.

This is yet another 'first of its kind' prosecution, showing another area of law where enforcement is on the rise. We have already seen enforcement expansion in other areas (e.g. the gallerist who was convicted under the Terrorism Act earlier this year) and it's clear that the government is moving past just warnings and slaps on the wrist.

The takeaway? It's worth reviewing how you are approaching all areas of your AML and KYC process. New types of prosecutions are on the rise, and it's becoming clear that the expectation for galleries is that you have strong procedures and controls in place.


3. Even well resourced galleries can make mistakes.

Of course, larger galleries are going to face more scrutiny from regulators. But even well-run AMPs with dedicated compliance teams can be caught out.

The takeaway? Simplify your process to help reduce mistakes, and ensure you treat compliance as a natural part of every significant sale. Use tools like Arcarta that understand the nuances of how the art world operates to help ensure nothing slips through.


Now do you have to be worried? As we always say, if you have a strong system in place, and are doing appropriate due diligence on each sale then you have nothing to worry about. But if you're still trying to do the bare minimum and ignore your obligations, the consequences can be very serious.

Of course, if you're unsure whether you are compliant, feel free to reach out and we are happy to support you with a complimentary consultation.